Establishing risk limits on only part of the financial structure is a common reason for why risks are not appropriately managed. Setting a risk limit focused on net interest income (NII) volatility does not consider the entire financial structure and can lead to bloated operating expense structures. For example, assume a credit union has a […]
With the recent focus on contingency liquidity planning, many credit union management teams are evaluating how to meet the potential demand that a rapid-onset, high-impact liquidity event may have on their balance sheet. In order to meet a hypothesized short-term contingent event, management teams are turning to the Central Liquidity Facility (CLF) or Federal Reserve […]
Continuing with our message from last week, if you are running NEV, there are some other changes you will notice as a result of borrowing rates increasing. As pointed out last week, NEV calculations for the current rate environment will result in shares showing increased value as “market rates” (generally represented by borrowing rates) have […]
Net economic value (NEV) is often cited as one way to quantify the interest rate risk exposure of a financial institution. While there are many concerns with relying upon NEV to provide good decision information, this discussion focuses on recent changes in interest rates and the resulting impact to the NEV of credit union shares. […]
The strategic planning season is right around the corner. At the end of their overall strategic planning process, many credit unions believe they have linked strategy with their desired financial performance. Some credit unions decide on targeted financial ratios and believe they are linking strategy with financial performance, but not high-functioning credit unions. They simulate […]
